Economics 11/12: Unionisation structure and product innovation

Abstract

This paper considers the effects of different labour unionisation structure (viz., decentralised and centralised unions) on product innovation. Although the presence of labour unions reduces the incentive for product innovation compared to the situation with no labour union (or if the unions have no bargaining power in wage determination), the effects of different labour unionisation structure on innovation are not so straightforward. In the case of symmetric product differentiation, the incentive for innovation is higher under decentralised unions. However, the incentive for innovation can be higher under a centralised union than under decentralised unions in the presence of asymmetric product differentiation. Our paper provides a new perspective to the literature by focusing on product innovation.

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Authors

Debasmita Basak and Arijit Mukherjee

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